Baird’s cuts and sales to rein in deficit

NSW Treasurer Mike Baird: “We will end up with the most generous home buyers scheme in the country.” Photo: Nic Walker

Michaela Whitbourn

An expanded program of asset sales and deep cuts to the public service will be used to boost infrastructure spending in NSW and rein in a deficit triggered by a sharp drop in goods and services tax revenue.

Treasurer Mike Baird announced in the 2012-13 budget yesterday that Port Kembla, near Wollongong, would be included in the sale of Port Botany in Sydney to increase the sale price by up to $500 million.

The privatisation of Port Botany was included in the state budget last year and was expected to be completed in mid-2013, generating up to $3 billion for the state.

Experts advising on the transaction had said that adding Port Kembla to the sale as a package “adds significant value”, Mr Baird said.

Port Kembla’s proximity to Moorebank, near Liverpool in Sydney’s south-west, was significant, he said.

The federal government and the private sector both have plans for freight hubs in Moorebank that would be used to transport cargo to and from Port Botany by rail.

Mr Baird said the sale would give the government “more firepower needed to get the state moving on infrastructure”.

The Coalition expects to generate another $300 million by selling assets that will be identified by a taskforce chaired by prominent banker Geoff Levy, an associate of businessman David Gonski. It will also consider selling off the $330 million annual income stream from NSW Lotteries to raise money for infrastructure, but it is not clear whether ratings agencies will regard this as a genuine saving. NSW Greens MP John Kaye said the sale would be an “accounting trick”.

Infrastructure spending will rise from about $5.8 billion a year to $8 billion, and $30 million will be set aside to plan a new Sydney motorway. The road will be identified by Infrastructure NSW, chaired by former premier Nick Greiner, when the advisory body releases its infrastructure strategy in September.

A stoush between NSW and Canberra over funding for the Pacific Highway upgrade is set to continue, after NSW set aside $1.5 billion to fund 20 per cent. Federal Infrastructure Minister Anthony Albanese said Canberra would only provide $3.56 billion for the project if the state matched it “dollar for dollar”.

Business groups welcomed the budget, described by Premier Barry O’Farrell as a “a steady-as-she-goes budget which reins in costs, targets spending cuts and invests in infrastructure”.

But Australian Industry Group NSW director Mark Goodsell said the Coalition faced a “big challenge” in delivering on its promises to transform the NSW public sector, stimulate housing demand and free up ­capital for infrastructure.

Opposition Leader John Robertson said the budget was built on ­“broken promises”.

Unions NSW would not rule out strikes over the axing of up to 10,000 public service jobs as government agencies are forced to deliver $2.2 billion in savings over four years.

This is in addition to 5000 public sector voluntary redundancies announced in last year’s budget, of which about 1300 have been realised.

Another 750 middle-management positions at train operator RailCorp will be axed in coming years under a radical restructure of the organisation.

The Treasurer revealed a forecast deficit of $824 million in 2012-13, but promised to return to average surpluses of $600 million from 2013-14, despite an “unprecedented” $5 billion drop in GST revenue.

The surplus is predicted to rise from $289 million in 2012-13 to $562 million in 2013-14 and $1.2 billion in 2015-16.

Net financial liability – underlying debt plus unfunded superannuation liabilities – is expected to edge up to 119 per cent in 2011-12 before dropping to 112 per cent by 2015-16.

This is below the 120 per cent to 130 per cent considered dangerous by ratings agencies.

Standard & Poor’s said yesterday NSW’s AAA rating was not “immediately affected” by the budget.